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AHCCCS Update

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Arizona Health Care Cost Containment System (AHCCCS) Summary

AHCCCS model has been documented to provide higher quality coverage at lower costAHCCCS has had to administer significant reductions in response to ongoing fiscal crisisArizona has implemented or is pursuing all suggestions from Secretary to GovernorsWaiver proposal promotes the objectives of Title XIX by maintaining core program for members and providersWaiver proposal is term limited until January 1, 2014

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AHCCCS Milestones1965 – Congress enacts Medicaid1982 - Arizona was the last state to join Medicaid –

Created Arizona Health Care Cost Containment System (AHCCCS)Established Mandatory Managed Care through 1115 waiver

2000 Voters approve Proposition 204 providing coverage up to 100% of the federal poverty limit2010 – Federal Health Care Reform is enacted

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AHCCCS Population as of July 1, 2010

1985 – 2010

144,450

456,385 508,917

318,383

1,047,982

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

.

2010

1,352,908

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Prop 204 Expansion Population(January 1st)

050000

100000150000200000250000300000350000400000

2005 2006 2007 2008 2009 2010 2011

SSI Parents Childless Adults

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AHCCCS Total Population

Child 0-2154%

Adult 22-6441%

Adult 65 +5%

Child 0-21 Adult 22-64 Adult 65 +

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Arizona/AHCCCS Overview6.5 million people in state - 14th largest80% of Population in Maricopa (Phoenix) and Pima (Tucson) countiesArizona 6th largest State in sizeAll members enrolled in mandatory managed care except American Indians and Federal Emergency ServicesAHCCCS contracts with 10 plans for Acute –geographically based AHCCCS contracts with 9 Long Term Care plans –geographically basedAHCCCS contracts with Department of Health Service for Behavioral Health carve-out – In turn contract out with 4 entities – geographically based

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American Indians in AZ & AHCCCSAmerican Indians in AZ & AHCCCS

Arizona Residents

Arizona population: 6,343,952285,183 AI Arizona residents

AHCCCS Members

AHCCCS members: 1,344,173140,442 AI AHCCCS members

Arizona has 22 different tribes located throughout the State

State conducted 12 consultations in 2010 – 2 on tribal lands

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AHCCCS Model for Medicaid Managed Care

Member choice & Competitive Plans 6 plan options in Phoenix metro (Maricopa)5 plan options in Pima County3 Long Term Care plan options (Maricopa)Acute care choice statewide

Cost Containment –Overall lowest cost – KaiserOverall lowest pharmacy PMPM – Part D Implementation –Lewin ReportGold Standard for Managed Care Purchasing – Rockefeller InstituteArizona employs “best practice” for date of death records –HHS OIG

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AHCCCS Model for Medicaid Managed Care

Quality Measures – 17 of 25 quality measures are above HEDIS Medicaid MeanMember Satisfaction – less then 3% of members change plans annuallyProvider Participation – remains high with little change even after rate reductionsPlan Oversight – 2 plans with membership caps in past 18 months – transparent actions on WEB –System CYE 2009 profitability <2%

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Arizona Model and Health Care Reform

Population Expansion – Childless adults – Only limited number of states cover this population to 100%Appropriate Payment to ensure access –Professionals 95% of Medicare – outpatient at MedicareEmphasize home and community services

Over 70% EPD – over 98% DDDual Eligible Population – National leader – Members in managed care - one third members aligned in SNP – application submitted for CMMI contractStreamlined Eligibility – Web based Application – 30-40% of applications submitted using Health E –Arizona – Great community response

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0

20

40

60

80

100

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09

Perc

enta

ge %

Nursing Facility

Home and Community

Effective Use of Home and Community Based Care

ALTCS Trend in HCBS Utilization

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Health E-Arizona Applications

050,000

100,000150,000200,000250,000300,000350,000400,000450,000

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

PublicSubscriber

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AHCCCS Program IntegrityAgency created central Office of Inspector GeneralIG received Medicaid Integrity Inst. Distinguished Service AwardEven with 30% reduction in agency staff, resources dedicated to program integrity have increasedSigned contract with Data analytics vendorHad 3rd lowest error rate of 17 states in national study (PERM)Conducted two significant date of death comparisons with minimal findingsDeveloped and distributed 3 training modules to staff – plans –members and providersApplied for OMB Program Integrity Funding GrantProgram Integrity Results – FY 2010

Cases investigated – AHCCCS – 1183Total Convictions – 14Total OIG Fraud Avoidance and Recoveries - $34.7 mTotal Prepayment Coordination of Benefits - $1,376.4 million

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0%

5%

10%

15%

20%

25%

US

AZ

Arizona 2008 PERM results

States

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AHCCCS Budget

3 Options for Policy Makers when dealing with AHCCCS budget reductions

Eligibility – Limit - Health Care ReformPayment Rates – Limit–Network & Access to Care Benefits – several optional services eliminated 10-1-10 –

Each has limitations but to date all have been utilized

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AHCCCS Budget changes to Date

AHCCCS Program is $874 million less in FY 2011 as a result of policy changes (total fund)

$413 million in provider rate reductions$241 m in institutional rate freezes$121 m in eligibility reductions (KidsCare & KC parents)$39 m in benefit changes$29.5 m in admin reductions$28 m in increased member cost sharing

Additional 5% reduction scheduled 4-1-11 $300 m

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AHCCCS Budget Cont.Difficult decisions have been made with the elimination of most optional services – very few left – pharmacy and HCBSApproval of sales tax helped program avoid additional 10% rate reductionEstablishing annual Inpatient limit for adults on Oct 1, 2011Cost Sharing has been maximized at federal limits for acute

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AHCCCS Staffing Levels

800

900

1000

1100

1200

1300

1400

1500

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Oct-09

Jun-10

Oct

Employees

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Secretary Sebelius ChecklistBenefits

Eliminate Optional Benefits – DoneLimit Benefits – Done – IP 10-1-11Cost Sharing – Done – beyond federal limits through waiver – still awaiting final SPA approval (13 months)

Manage CareIntegrate Acute and Long Term Care – DoneEmphasize HCBS – DonePrimary Care/Medical Home – DoneACA – 90% Health Home – Community 1st Choice Option -Ready

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Secretary Sebelius ChecklistPharmacy

Reduce Spend – Done - # 1 in CountryProgram Integrity

Ongoing – Analytics – Increased resources – PERM results – OIG recognition – date of death –Grant request OMB

Duals Eligible Members National Leader with aligned managed care model and applied for CMMI contract authority

Executive Budget makes painful reductions throughout State Government but still $500 million short in FY 2012– Now What??

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1115 Waiver Proposal

In 2000, voters expanded Medicaid coverage to all residents at or below 100 percent of the federal poverty limit – Proposition 204FY 2012 General Fund support for the expansion population is estimated to be $810 million The Executive recommends limiting Prop. 204 costs to dedicated tobacco settlement and tobacco tax revenuesWould be time limited until January 1, 2014

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1115 Waiver ProposalArizona requests a waiver from the Maintenance of eligibility requirements

Eliminating coverage for childless adults and medical expense deduction category (250,000)Capping TANF parents at a level that can be sustained (30,000 parents lose coverage – approx 90,000 maintain)Continuing coverage for 30,000 Aged, Blind and Disabled

The State is requesting a waiver from the Transitional Medical Assistance requirements for those categorically eligible that would lose coverageFY 2012 General Fund savings are estimated at $541.5 million ($1.1 billion in federal match)FY 2013 proposal would generate almost $1.0 billion GF savings

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1115 Waiver ProposalSection 1115 Waiver – Promoting the objectives of Title XIX -

focus on maintaining “core” Medicaid ProgramPreserve core provider network – cannot keep reducing provider rates – >25% additional reduction in FY 2012 to generate same dollars as waiver proposalAllows Arizona to Preserve coverage for traditional Medicaid groups – children – elderly - disabledPreserve remaining benefits Preserve core plan and administrative infrastructureMaintain federal/state partnership and flexibility that are core principles of Medicaid program Establishes Eligibility levels similar to other states

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Mitigation Proposal

The Executive recommends two steps to mitigate the impact of the change in eligibility:Create a $151.0 million uncompensated care pool ($50.0 million GF, $101.0 million matching funds) Allocated to Arizona healthcare providers for uncompensated care. (hospitals – clinics –emergency transportation)Funds will be available to reimburse healthcare providers for continuing care for the most seriously ill.Majority would be allocated to hospitals but other providers could qualify

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Mitigation ProposalSeriously Mentally Ill− Provide $10.3 million state only to DHS to fund

prescription drug coverage − 5,200 SMIs are in childless adult category− Agency working with DHS and expects to reclassify

>80% of SMIs into different category.Children− Currently 11,000 kids in adult category due to family

unit budgeting− Looking at a SPA change to have kids made eligible

for SOBRA category

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Proposition 204 LanguageBallot language stated

“A ‘yes’ vote shall have the effect of providing funding for …increasing healthcare coverage eligibility…using tobacco litigation settlement money”“A ‘no’ vote shall have the effect of not requiring appropriation of tobacco settlement money to support these programs.

The ballot language also directed that the Tobacco Settlement monies shall be “supplemented, as necessary, by any other available sources and federal monies”Legislature has authority based on no available sources and case law is supportive of this positionUltimately State Supreme Court would decide if litigated

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Provider Tax Status

Hospitals have been discussing provider tax for 2+ years1% of revenues equals approximately $100mProposal would be for $300 m taxWould want $100 m for rate increasesRequires two-thirds vote from legislatureProposal currently insufficient Still significant details to work throughProposal is for 1 year Assessment

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SummaryAHCCCS model has been documented to provide higher quality coverage at lower costAHCCCS has had to administer significant reductions in response to fiscal crisisArizona has implemented or is pursuing all suggestions from Secretary to GovernorsWaiver proposal promotes the objectives of Title XIX by maintaining core program for members and providersWaiver proposal is term limited until January 1, 2014